- Bad credit can cost you, and the sooner you work to fix it, the better off you’ll be.
- Make sure your credit report is accurate, pay your bills on time, and pay down your debt.
- You don’t need to pay for a service to improve your bad credit; you can do this on your own.
Good credit gives you a strong foundation for money matters; it could help you pay less for everything from a car loan to your mortgage. Most credit scores range from 600 to 750 but if your credit score is less than 600, it’s time to do something. There’s no quick fix; fixing a bad credit score takes time and discipline. But you can do it.
Know your numbers
First, make sure you understand how credit works. Your overall credit is measured by several factors; the two most important are how much credit you use and how reliable you are in paying your bills. But there are other considerations—how long you’ve had credit, for example. Creditors also want to know how you handle different types of credit—installment loans such as mortgages and car loans, and revolving accounts like credit cards. They also look at your history of applying for credit. If you’ve recently applied for multiple credit accounts, it will count against you, so only apply for the credit you absolutely need.
Here are 3 things you can do to fix bad credit.
1. Check your credit report and fix any errors
The only way to know if your credit is good or bad is to check. But don’t just look at your score; look closely at your full credit report. Use AnnualCreditReport.com, the only authorized website that allows you to get a free report every 12 months from each of the three major credit bureaus—Equifax, Experian, and TransUnion.
Review each of the reports carefully to make sure there are no errors or outdated information. If you find something that’s incorrect, take the time to change it with each credit bureau.
2. Pay your bills on time
Life gets busy, but late payments hurt good credit; on-time payment history counts for about one-third of most credit scores. To avoid missed payment deadlines, set calendar reminders on your phone, and consider paying your bills at the same time every week—Wednesday night, for example. Consider making online payments to avoid the ‘I can’t find a stamp’ excuse. And if you know you’re going to be late paying a bill; call your creditor to see if you can work out an alternate payment plan.
3. Reduce your debt
How much credit you’re using is also important; the less debt you use, the better your score will be. Keep low balances on credit cards and pay them off as soon as you can. If you only pay the minimum amount of what you owe each month, your credit score will not improve. Start by paying $50 or $100 more than the minimum each month for credit cards, your mortgage and car loans.
Set a budget, stick to it, and consider different strategies. For example, limit your credit card use to just gas and groceries and pay cash for everything else or limit your dining out for a month or two and use the money you save to pay down your credit card balance. If you already have outstanding debt, try waiting before making major new purchases; consider fixing that car and driving it one more year instead of buying a new one.
Many people face financial challenges that have impacted their credit, but bad credit can be fixed. Don’t be tempted to respond to ads promoting credit repair; you can do this on your own, without paying for it. But it takes time to fix poor credit so the sooner you start, the faster you’ll benefit.